Ottawa Hospital expansion project warrants an investigation

Competition matters. It drives our economy, improves productivity and translates into higher quality at a lower cost. Yet the Ottawa Hospital’s $2.8 billion expansion project, seems to ignore all of the proven benefits of competition, especially for taxpayers, local workers and companies.

The Progressive Contractors Association of Canada (PCA) whose members build major infrastructure and capital projects across the country, is urging the Competition Bureau to investigate a labour arrangement that’s being applied for the first time in the construction of an Ontario health care facility.

Prior to the construction of every other new hospital in Ontario, including Oakville Memorial, Cortelluci Vaughan, and the Bowmanville Hospital, there was a competitive procurement process. Bids were encouraged from all qualified contractors regardless of the union their workers chose. The Ottawa Hospital’s expansion project is the glaring exception.

The hospital’s decision to enter into an exclusive agreement with the Unionized Building and Construction Trades of Eastern Ontario and Western Quebec, is unprecedented. Only contractors and workers affiliated with this labour group can build the new Civic Campus, which means that thousands of Ottawa area construction workers as well as many highly respected and experienced local construction firms are being shut out.

It seems to us that The Ottawa Hospital’s restrictive Project Labour Agreement (PLA) is clearly anti-competitive. Prohibiting bids from any contractors not affiliated with the list of Building Trade Unions is a blatant example of exclusive dealing, tied selling and market restrictions, which run counter to the Competition Act.

The Competition Bureau has a responsibility to protect competitive markets so that Canadians experience the full benefits of competition. That applies to construction. A report by the Montreal Economic Institute, titled How to Reduce Construction Costs in Ontario – Modernizing the Construction Industry, finds that The Ottawa Hospital’s restrictive PLA stifles competition, and as a result, will cost taxpayers dearly.

The MEI estimates that this labour deal will escalate project costs by anywhere from $168 million to $525 million. The worst of it, concludes the MEI, is that the public is on the hook. “It is unacceptable for a public entity to make taxpayers pay more by granting exclusivity to only a certain group of affiliated workers.”

Look no further than B.C. to fully appreciate the downside of restrictive PLAs, which have been imposed on several large infrastructure projects in that province. This labour arrangement has led to a meteoric rise in project costs. Construction of the new Cowichan District Hospital on Vancouver Island for example, has exceeded original estimates by 63 percent, or a whopping $559 million. Not only that, Cowichan Tribes’ workers have been told they can’t build this hospital in their own community because they don’t carry the right union card.

When there’s healthy competition, all qualified companies and workers have an equal opportunity to apply their skills to local projects. It’s also well proven that competition lowers construction costs by at least eight to 15 percent. The greater the number of bids on a project, the lower the cost. Competition encourages contractors to innovate, and put their best bid forward. This ensures the public gets good value on infrastructure investments.

So why would The Ottawa Hospital agree to a restrictive PLA? The answer, may be what it receives in return. The agreement states that while the Project Labour Agreement is in force, each Bargaining Agent “will make a charitable gift to The Ottawa Hospital that is roughly proportional to work opportunities provided to members.”

The Competition Bureau should get to the bottom of this deal. Given the significant public cost of the hospital expansion, an investigation is in the public interest. Thousands of Ottawa construction workers and local companies, also deserve to know why they have no shot at building one of the largest infrastructure projects in the city’s history – one that their tax dollars are paying for.